Super Wealthy Flock To South Florida Lured By The Appeal Of More Sunshine And Fewer Taxes

The view of downtown Miami from the Rickenbacker Causeway on Monday, May 21, 2018.

DANIEL VARELA DVARELA@MIAMIHERALD.COM

The pull of sunshine, designer living and lower taxes are attracting more home buyers to South Florida's high-end real estate market.

And Michael Goldstein, President of the Acqualina Brand, says the buyers are coming from one place in particular.

“Sixty-five percent of my buyers are coming from the northeast,” Goldstein says. "Most of the buyers that are coming in, they are not buying my small units, they are buying combination units, penthouses, single-family homes.”

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New York City hedge-fund managers and Silicon Valley CEOs are becoming the new "foreign buyers" in south Florida. A new tax law signed by Donald Trump in 2017 capped state and local tax deductions at $10,000, prompting high earners to move to lower tax states, such as Florida. Maria Bakkalapulo finds out more about the surge in the luxury market.

At a time when affordability has become a major problem for South Florida residents, New York City hedge-fund managers and Silicon Valley CEOs are the new “foreign buyers” driving prices and property values further away from the average salary.

“We are seeing the early stages of migration of homeowners that are in the northeast or in California. They [are] really focused on lower tax situations,” says Jonathan Miller, chief executive of the real estate appraisal firm Miller Samuel and author of the Douglas Elliman report, where he analyzes market trends for real estate buyers and sellers.

Donald Trump's new tax law, which went into effect last year, capped state and local tax deductions - including property tax - at $10,000. The changes mean that the wealthy in higher-taxed states, especially those with high property taxes, could end up paying more than they had in years past. This is prompting many high earners to move to locations with a lower net tax for them - like south Florida.

“This was the tipping point or the driving reason for the change," Miller says.

Realtors' experience seems to confirm what Miller is seeing in the data.

“We have one buyer from New Jersey [who] bought the whole entire floor,” Goldstein says. “They are buying to live.”

Miami Beach has seen a spike in demand, especially among high-priced properties. Miller’s report found the median price of single-family homes above $7.25 million jumped 61 percent in the first quarter of 2019, compared to a year ago. During that same period, at least nine properties were sold in the area with an average price of $14,548,889 or $1,524 per square foot.

For comparison, the median list price per square foot in the Miami-Fort Lauderdale-West Palm Beach metro area is $221, according to the real estate digital tool Zillow.

“This is not some handful of people," Miller says. "There is real activity we are actually seeing at the high end of the market, which we call the luxury market, which we describe as the top 10%.”

The buyers have the money to spend.

“All my buildings are cash, we had no buyers ask about mortgages, not one. They put 45% deposit up front,” says Goldstein.

Almost half of the sales of luxury properties quoted by Miller in his Miami Beach report were in cash, compared to 38 percent county-wide, according to the Miami Association of Realtors.

"[Before] if you were taking out a buyer and they were looking at that category north of $10 million, it was strictly about vacation,” says Hernandez. “The conversation we are having now, is 'I am going to move my family and kids down here, what schools can I take them too?'”

The increase in demand has led to a 38.5% drop in inventory in the ultra-high-end market in places like Miami Beach during the last year. “Exactly 24 months ago, we would sit here and say there’s 25 homes roughly, all asking north of $20 million,” says Hernandez. "Twelve months passed, not a single one of them sold. But in this past year, literally all of them sold.”

The influx of wealthy residents is also having a spill over effect on other aspects of life, from schools to property values. For example, Business Insider reported the influx of buyers from the northeast has led to longer waiting lists at some local private schools, such as Palmer Trinity School in south Miami-Dade County and Miami Country Day School.

"It is definitely creating some gentrification," says real estate agent Bryan Sereny. “It is increasing our tax base, which South Florida definitely needs to combat some of the environmental issues we have in front of us.”

Correction: The original version of this story identified Bill Hernandez, realtor at Douglas Elliman Real Estate, as the person saying: “All my buildings are cash, we had no buyers ask about mortgages, not one. They put 45% deposit up front.” The quote is from Michael Goldstein, President of the Acqualina Brand. We regret the error.

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